Federated Department Stores is expected to finalize a deal over the weekend to acquire the owner of Minneapolis-based Marshall Field's. Marshall Field's is owned by May Department Stores Company. May bought Marshall Field's last year and has left the Minneapolis operation intact. But if May itself is sold to Federated, experts predict many local jobs would go away.

Minneapolis, Minn. —
First the players.

Federated, the likely buyer, owns the Macy's and Bloomingdale's chains. Federated is based in Cincinnati.

May is based in St. Louis, and owns Filene's and Lord & Taylor, in addition to Marshall Field's.

The company kept Marshall Field's a stand alone operation after buying it last year. That spared jobs in Minneapolis.

The combination of May and Federated would produce a department store behemoth with almost 1,000 stores.

Howard Davidowitz, chairman of a retail consulting and investment-banking firm in New York says Federated (remember, Bloomingdale's and Macy's) would be under pressure to reduce costs if it buys May.

"It costs them 6 percent more to run their business than May company. So a priority will be to cut costs and to streamline. At the end of the day there will be blood all over the streets, and lots of people will be out, including people in Minneapolis," says Davidowitz.

You don't pay a lot of money for a no-growth business. That just doesn't make sense.

- Howard Davidowitz, chairman Davidowitz and Associates

Retail expert Dave Brennan at the University of St. Thomas agrees. He says hundreds of jobs in Minneapolis would be cut under Federated, many that are well paying.

"The senior buyers and the like are probably making certainly, if they're not at $100,000, they're close to it," says Brennan. "And with bonuses and everything else, they could well be beyond that."

Brennan says Federated is trying to build national department store chains, under the Macy's and Bloomingdale's names. The company has tacked the Macy's name on to regional chains it owns like Lazarus and Rich's.

Brennan predicts the Marshall Field's and other May Company names would be taken off stores and be replaced by either Macy's or Bloomingdale's. He says Twin Cities shoppers would see a lot of Macy's. Brennan says there are certain benefits to operating as a national chain.

"The most obvious one is [that] as a national chain you can do advertising across the whole country," says Brennan. "And in fact you can do national television advertising rather than doing regional advertising or even market by market, which is very expensive."

Brennan says traditional department stores have suffered at the hands of discounters like Target and Wal-Mart, and specialty stores like J.Crew and The Limited. Brennan says the department store industry is moving from a period of maturity to decline. He says that means fewer but bigger players that have to be more efficient.

Retail brand consultant Tina Wilcox says a marriage of Federated and May would help the combined companies by giving them more clout with suppliers to get lower prices. But she says department stores have tried and failed to compete on the basis of price.

"If they just continue down the path they've continued down with a thousand stores, it's just going to magnify the problem," Wilcox says.

Wilcox says a combined May and Federated should take a lesson from high-end chains, like Neiman Marcus. They're thriving selling items like $3,000 dollar handbags and fur-trimmed tweed jackets. But Wilcox she says she's not saying department stores should simply sell high cost purses.

"The reason the top end is still working is because the products are really unique," says Wilcox. "And so I think the formula really is to try to offer good value on very unique and original items that you can't get at the mass merchandisers."

While Wilcox says a May-Federated merger would be smart, Howard Davidowitz couldn't disagree more. He says Marshall Field's itself would be a good fit for Federated, but buying all of May is crazy.

"The deal does not seem rational to me on the face of it. You don't pay a lot of money for a no-growth business. That just doesn't make sense. You pay a lot of money for a business that's going somewhere. May company is going nowhere but in the tank," says Davidowitz.

May officials declined to comment. Federated's spokeswoman did not return a call seeking comment. May's board is expected to consider an offer over the weekend.